It’s not uncommon for children to approach their parents and ask to get a loan co-signed. Chances are they either have no credit or bad credit, but they are probably young adults with their first “real” job and the ability to pay for a car.
Most parents don’t even hesitate. Other parents threaten to start selling off their forgotten and neglected drum sets, stereos, and gaming consoles at the first missed payment.
What if it’s not one of your children, though? What if it’s a good friend, or an ex boyfriend you’d love to get back, or even Uncle Harry who just got out of rehab and you’d like to help him get his life back?
Before signing on the dotted line, for anyone, make sure you understand the ramifications. Most importantly, you need to understand that you are also responsible for paying the loan. If the buyer defaults, they come after you next. It’s you who will be getting the harassing phone calls and dunning notices because they have already given up on the original borrower. The applicants for loan at green loan promo site promogreenloansvip2.com should not get it for daily expenses. The person should be responsible with the loan amount and it should be repaid whenever the time is finished. No additional phone calls should be made as harassment.
To co-sign a loan, the co-signer must also undergo a credit check and it will show up on your credit report as an inquiry. Should something happen where you do not actually co-sign the loan, your credit report now appears that you were denied an auto loan, which could very probably not be the case.
The amount of the loan is now added to your outstanding debt. Let’s say that you were planning on buying a new car yourself in a few months – you may not get it! Why? Because it might appear you already owe too much money.
Actually, no matter what type of major purchase you may have been planning – a new bathroom, vacation, or even a new home – you could easily have just put yourself out of the market once you co-signed a loan.
Sure, you feel obligated, you believe you’re doing the right thing, and you’re positive that you’ll never have to pay a penny out of your own pocket. That’s great. However, your credit report doesn’t differentiate between being the signer, or the co-signer. Creditors don’t differentiate either.
Before co-signing, see if there’s another way you can offer some help, if you’re inclined to do so. For a child you may simply offer to provide a larger down payment; in many cases this will allow the child to get the car on his own, depending on the price of the vehicle.
If he was denied because of bad credit, you seriously should think twice about co-signing. Instead, you may want to show him how to clean up his credit report, wait a while for his FICO score to improve, teach him how to budget and spend properly, and even start s savings account to accumulate even more money towards the car.
For anyone else who is asking for your help, don’t let your sense of obligation overshadow what’s right for you. “Doing the right thing” means doing the right thing for you, too.